TICKY FULLERTON, PRESENTER: A man whose job it is to watch both Europe and world markets very closely is Jim O'Neill, chairman of Goldman Sachs Asset Management.

Mr O'Neill helps oversee over $700 billion in funds. He's a reported contender for the next Bank of England governor and he joins me now from the London Stock Exchange.

Jim O'Neill, welcome to the program.

JIM O'NEILL, CHAIRMAN, GOLDMAN SACHS ASST MGMT: Thank you very much for having me on.

TICKY FULLERTON: Well we're hearing now that G20 leaders will discuss a $750 billion euro deal to bail out Spain and Italy. I'm wondering if that fills you with confidence.

JIM O'NEILL: Well, one has to be always careful about what's done as opposed to what's said and particularly as it relates to this issue. There's other big meetings coming up where the key European policy makers will all be absent, so the G20 can't solve Europe's problems.

Europe's problems need to be solved by Europe's own leaders. So, what is clear from the G20 discussions is that the pressure from Obama and others has seemingly got to the key player, Angela Merkel, and so it's adding to belief that the Germans are prepared to give something about a more truly pan-European approach to solving these issues.

One of the things - sorry - one of the things I'm very fond of pointing out to people: if you look at all the European debt and deficit challenges, if you looked at them on an average weighted basis of euro area, they're actually less than they are in the US and Japan.

So, if you got true pan-European solutions, then I think this problem could disappear very quickly, but trying to get policy makers to focus on truly pan-European solutions is not easy.

TICKY FULLERTON: Indeed. Well there is now talk of course of a pooled economic sovereignty and this idea of an integrated system of banking regulation. Do you think Mrs Merkel is the key to those things happening?

JIM O'NEILL: Well I think down the road that is inevitable, but whether she can deliver something in terms of a firm commitment on it by next weekend is a lot more difficult because she has a number of complicating and potentially contradictory challenges still.

All the German population always seem to show in opinion polls that they're very much in favour of the euro and have very bold and strong beliefs that it should strengthen and be part of their future, but they're not so eager to spend a lot of money on it either.

So, she needs to persuade German people that the cost of it is worth the glory, so to speak. And that's something she can't pull off overnight. That can only happen slowly through time.

TICKY FULLERTON: Now of course I'm dying to ask you about the BRIC countries because that was the term that you yourself coined about over a decade ago now - Brazil, Russia, India, China. They were supposed to be these great furnaces of growth, but growth has been extraordinarily disappointing, hasn't it?

JIM O'NEILL: Well I don't think that's true about the BRICs in general. China - the C in BRIC is a lot more important than the other three. China is the same size as the other three put together.

And even though China is slowing, China's slowing because the policy makers primarily deliberately slowed the economy to get rid of inflation. And if China grows by close to 8 per cent in real terms and about 12, 13 per cent in nominal dollar terms, China is creating the equivalent of another Greece every 11 and a half weeks, the equivalent of another Spain every year, and because of that, the four BRICs, even with genuine disappointment in Brazil and India, they will be creating not far from another Italy in 12 months.

So, it remains the biggest economic factor of our generation and obviously very important for everybody, particularly you guys in Australia.

TICKY FULLERTON: The way you describe China, it actually puts a completely different perspective on it. But what about India and Brazil too, because that is where our prime minister is headed now?

JIM O'NEILL: I think of the four of them, India is the one that bothers me most in the immediate outlook and it has done for most of this year. India needs to borrow some of China's decisiveness.

In many ways, India's too much in love with its own democracy. They're often eager to say it's the world's biggest democracy, but many times Indians smother themselves with their democracy. They need to get - in some ways it's a bit like the problem that Europe faces. You can't have everybody debating and blocking decisions all the while; you need leadership.

And of course we all criticise China for not being a democracy, but when they get - want to get things done, they get things done and India needs to learn some of that otherwise India's gonna disappoint for quite a while.

TICKY FULLERTON: Brazil has been seen as a very similar country in many ways to Australia. Their growth has been slightly slower certainly in the last year than expected.

JIM O'NEILL: Yeah, yeah. I often think of Brazil as sort of the new lucky country, taking up your mantle and there are very strong comparisons.

In fact the biggest challenge they have is a bit like the one that it seems to me you face, a bit of a two-tier economy has come around again and the strength of the Brazilian currency has become a big problem for them in the same ways that the strength of the Aussie dollar has compounded some of Australia's challenges.

And the Brazilian authorities need to - have got the Brazilian real weaker. They are doing things to try and bring that end around. They've actually had some success. The real's 25 per cent down in the past four months.

And whilst that brings its own challenges, particularly with respect to inflation, I think it's something that Brazil should stick with because they need to improve the balance of the economy and not be as dependent on commodities as they've been.

TICKY FULLERTON: And briefly, where does that put Australia?

JIM O'NEILL: You know, Australia's in a slightly tricky position as well for the first time in many, many years. China, in particular, is the key driver of the external terms of trade for you.

In my judgment, it's moving to an era where it's all about the quality of growth as opposed to the quantity and they're not going to be consuming as much energy or as much polluting commodities in general as they have been.

It's a central part of the five-year plan. So that means the demand for various raw materials from China in Australia is not going to be as big as perhaps many people in Australia think.

But once Australia adjusts to that new reality, I don't think it should be a persistent dilemma or challenge and in fact it might help to take some of the pressure off the very strong Australian dollar of course.

TICKY FULLERTON: Jim O'Neill, delight to have you on the program. Thank you for talking to us, sir.